While the housing market has largely recovered from the economic downturn in 2008, one area that still looks weak is the percentage of people who own homes. And while the overall percentage of homeowners is at a historic low, the numbers look even worse when you look at Millennials. Adult Americans under 35 have a home ownership rate of just 34.3 percent, according to the US Census Bureau’s April 27, 2017 report. Here is what you need to know about this trend and why Millenials Struggle to Buy Homes Might be Worse in California.
- Millennials aren’t foregoing home ownership by choice. While only 34 percent of these young people own their own house, surveys find that over 90 percent of those renting plan on one day owning a home. This is higher than average for renters.
- One commonly cited reason for this lack of home ownership is that they are poor. Millennials on average make less money while having much higher debt than past generations. This high proportion of student debt combined with lower (adjusted) income means that fewer Millennials are having the cash necessary to invest in something like a house.
- Changing social norms also are responsible for the trend. The current generation is also foregoing marriage and parenthood at much higher rates than previous generations. This means that they are much less likely to feel pressure to move out on their own. Many young people are opting instead to live with roommates or even moving back in with their parents.
- Home Builders have also contributed to the trend. More and more new developments are aimed at older wealthier audiences, and this means that the smaller entry-level houses that would be needed by poorer younger buyers are simply not being constructed at the rates they would need to be. This is especially evident in markets like California, where the average monthly housing cost is a whopping 35% of the household budget. Nationally, this average is 19.4%.
This combination of changing attitudes, lack of money, and a lack of entry level properties are all major contributing factors in why Millennials are avoiding home ownership. Many of these national factors are worse in California, which also has a higher than average unemployment rate ranking 35 out of 51 according to the March 2017 Bureau of Labor Statistics. However, if Millennials are looking to buy a home, all hope is never lost. Today, there are more loans programs available. If you have a good work history and some savings, you could even purchase a home with as little as 3.5% down.
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